An important instrument in Europe for providing additional capacity to governments following major disasters is the European Union Solidarity Fund (EUSF). In setting up the EUSF, the European Commission recognised the dangers of moral hazard if governments take on fewer preventive measures because they can rely on post-disaster support from the EU. Discussions on reforming of the EUSF are ongoing, yet many questions remain open. A particular issue is to render the EUSF a risk based vehicle and implement incentives for risk reduction and climate adaptation and to assess options for cooperation with Europa Re - a Swiss-based specialty property catastrophe reinsurance company owned by Republic of Albania, FYR of Macedonia and Republic of Serbia (Europa Re Member States). We suggest that Europe can consider introducing requirements for pre-disaster risk management in the EUSF scheme, and hence focus on reorienting the EUSF from a post-disaster response and aid instrument to a pre-disaster, risk-based solidarity instrument. Europa Re is introducing ex-ante disaster risk financing mechanisms (catastrophe risk market development programme) in its Member States and we therefore study how it may interact with the Solidarity Fund.
This case study will test this perspective for Eastern Europe/Romania, and focus on pre-disaster measures for reducing flood and seismic risk. Two scenarios will be created: a scenario in which a set of disaster risk and vulnerability reducing measures and policies will be taken into consideration (pre-disaster risk management); and a scenario in which the EUSF intervenes in the same conditions as those existing now.
The longer it takes to recover from natural disasters the deeper and more widespread their effects are. Since 2002, the European Solidarity Fund (EUSF) supported countries faced with catastrophic events for an amount of over € 3.7 billion over 63 disasters. The governmental aid strongly differs across EU countries and many of them cannot cope with the consequences of disasters on their own.
Yet, with compensation restrictions for non-insurable public losses as well as its fixed budget, the EUSF has to limit the financial assistance provided leaving countries that take few preventive measures exposed to higher risk due to increasing occurrence of natural disasters.
Extreme events such as floods and earthquakes therefore present vast financial risk to both private actors and public authorities with potential governmental uncertainty when compensation measures are insufficient. In Romania, where a large area of the country is under high risk of flooding, the authorities are only partially prepared to face natural catastrophes. The main reasons are related to financial and human capacities. The country has thus become a common claimant of the EUSF resources. The fund is considered an important tool of recovery in the country, even though it should only act as an extra layer of funding and not as a complete post disaster support.
Strengthening and refocusing the EUSF
While the 2014 EUSF reform responded to some weaknesses, the ENHANCE project seeks to further strengthen the EUSF and Multi-sector partnerships (MSPs) by:
• Refocusing current transnational MSPs to increase the general coping capacity of national governments with extreme events;
• Reorienting the EUSF from a post-disaster response and aid instrument to a pre-disaster, risk-based solidarity instrument;
• Investigating the probability of EUSF to reach its limits;
• Providing improved sources of information to stakeholders, improving their knowledge of the risks they face.
State of play
• The project provides detailed flood loss estimations for both Romania and the EU;
• Partners have conducted a number of interviews with stakeholders including representatives of national and regional risk pools and other insurance companies;
• In January 2014 the preliminary findings of the case study were shared with European policy makers at a the occasion of a public hearing;
• Romanian stakeholders discussed disaster risk financing at a workshop organised by the Bucharest University of Economic Studies and IIASA in October 2014;
• Case study partners will further assess disaster risk financing at the EU level by inviting key stakeholders to a workshop to be held in Brussels in the course of 2015.
This case study will test the Solidarity Fund for Eastern Europe/Romania, and focus on pre-disaster measures for reducing flood and seismic risk. Two scenarios will be created: a scenario in which a set of disaster risk and vulnerability reducing measures and policies will be taken into consideration (pre-disaster risk management); and a scenario in which the EUSF intervenes in the same conditions as those existing now.
The total time period for the ENHANCE project encompasses 48 months (month 1: December 2012). The time frame necessary to complete the deliverables within the case study is:
D1. Report: Month 12
D2. Report: Month 17
D3. Report & Database: Month 27
D4. Report: Month 36
D5. Report: Month 39
Five deliverables are formulated by the case study:
D1. Report: Risk profile case study using conceptual framework
D2. Report: Stakeholders analyses and MSP
D3. Report & Database: Risk Assessment results
D4. Report: Description of MSPs and disaster resilience schemes
D5. Report: Case study synthesis and policy recommendations